Michigan schools are governed primarily by the State School Aid
Act, a law renewed and revised annually by the state Legislature. The basic purpose of the act is to calculate and appropriate the monies
available to the schools for the following school fiscal year. The Revised
School Code, in turn, is a state law that sets forth school governance policy,
mandates certain educational activities and directs the conduct of local and
intermediate school districts and charter schools.
Since 1994, the way in which Michigan’s public schools are
financed has been largely guided by Proposal A of 1994, a voter-approved
constitutional amendment that reduced the reliance of most school districts on
local property taxes and increased their reliance on state sales and property
taxes. Proposal A also instituted certain limitations on taxes levied for public elementary and secondary education.
A 1978 state constitutional amendment popularly known as the
"Headlee amendment" also plays a significant role in regulating the finance of
Michigan’s public school system. The amendment contains a limit on local
property tax rates and requires that the state Legislature pay the
cost incurred by local governments (including school districts) in meeting any
mandate the Legislature imposes on them.
This second provision of the Headlee amendment has led to
litigation concerning whether state government has been fully compensating local school districts for the cost of state educational mandates. The most
influential legal case in this litigation is Durant v. State of Michigan, a 1980 lawsuit brought by several individuals, 83 local school districts and one
intermediate school district concerning state mandates for certain special
education services, special education transportation services and a school lunch program. The Michigan Supreme Court ruled in 1997 that the state
had not met its constitutional duty under the Headlee amendment to finance the
mandates, and the state was ordered to pay the litigating districts
approximately $212 million in damages and to ensure that any future
cost of the mandates was fully financed by the state.